What is KPI?
TL;DR
Key Performance Indicator, the metrics most critical to your business success. Not every metric is a KPI; KPIs are the vital few that indicate whether you're achieving objectives. For a service business, KPIs might be leads generated, Cost Per Acquisition, and ROI. For e-commerce, revenue, Conversion Rate, and average order value. For content sites, traffic, engagement, and ad revenue. Choose 3-5 true KPIs, more dilutes focus. KPIs should be directly connected to business outcomes, measurable, and actionable. "Pageviews" is rarely a KPI because pageviews don't pay bills; "leads from organic search" connects directly to revenue. Review KPIs regularly (weekly or monthly) and dig into contributing factors. When a KPI declines, you need to know why and what to do about it.
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Frequently Asked Questions About KPI
What makes something a KPI versus just a metric?
KPIs directly indicate whether you're achieving business objectives. Pageviews is a metric; 'qualified leads from website' is a KPI because it connects to revenue. If a metric declining doesn't affect your business goals, it's not a KPI.
How many KPIs should I track?
3-5 maximum. More dilutes focus and creates dashboard clutter. Choose the vital few that truly indicate business health. Everything else is a supporting metric you might check occasionally but don't need weekly.
What are good KPIs for a service business?
Leads generated, lead-to-customer conversion rate, cost per acquisition, customer lifetime value, and revenue. For local businesses, add phone calls and direction requests from Google Business Profile.
How often should I review KPIs?
Weekly for tactical KPIs (leads, conversions). Monthly for strategic KPIs (revenue trends, retention). When a KPI declines, dig into contributing factors immediately, don't wait until month-end to discover problems.
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